Last week when Westwater Resources reported financial results for its first quarter ending March 2020, shareholders were given a view on how the coronavirus pandemic impacted the Company in the first months of the crisis. As expected the Company incurred incremental costs associated with keeping its employees safe. Administrative personnel were sent home to work remotely and field workers at the Texas uranium operations were furloughed until work-stoppage policies were lifted in that state. Importantly, the Company’s ‘front burner’ project to commercialize battery-grade graphite has proceeded as planned without interruption as contracted engineers migrated easily to work-at-home conditions. Accordingly the Company remains on schedule to complete design and construction of a low volume graphite production plant and produce one ton of the Company’s Purified Micronized Graphite (PMG) by 2021.
Speculative Buy remains our rating for WWR. Unfortunately, our target price of $30.00 remains a distant aim. The stock has traded higher in recent weeks in concert with peers in the uranium sector as renewed interest has been kindled by U.S. policy initiatives favoring domestic production. Nonetheless, valuation of the Company’s mineral resource assets suggests an intrinsic value substantially higher than the current price. The stock is currently priced at two-thirds of book value. In our view, investors have only partially recognized the progress Westwater management has made toward commercializing battery-grade graphite material. It is important from a risk assessment standpoint that this initiative is on schedule and that capital is available to get the project to the next step of having an operational pilot plant for low volume production.
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